Tough times mean skyrocketing bankruptcies

By Alex Gary

BusinessRockford.com

The number of residents and business owners filing for bankruptcy protection in 2008 soared more than 22 percent for the second straight year.

Heidi Berardi, vice president of Rockford-based Family Credit Management, said a variety of factors fed the increase, including the growing number of uninsured; rising unemployment; difficulty finding or keeping credit; and rising rates for adjustable rate mortgages.

“Our case load is up 25 (percent) to 30 percent. We’ve added hours and just hired eight more people in the last quarter, putting us over 50,” Berardi said of the not-for-profit group that does credit counseling nationwide.

In 2008, the organization became a U.S. Housing and Urban Development-certified housing assistance group as well because so many of their clients’ troubles stemmed from mortgage issues.

Usually, bankruptcies spike at the end of a downward economic cycle as people use credit to stave off collectors. The troubles in the finance industry, which has been hammered by losses from mortgage-backed securities, may be causing people to bottom out more quickly.

“It’s much tougher today not only to get credit but maintain it,” Berardi said. “If someone has an unutilized line of credit, banks are reducing the risk and pulling those. If you have a blip, miss a payment or something of that nature, credit card companies are closing accounts.

“That’s hurting people in the short-term because a lot of people are living on credit,” Berardi added. “They are being squeezed from both sides.”

It isn’t every day that more and more Rock River Valley residents file for bankruptcy. In 2007, only nine businesses filed for either Chapter 7 liquidation or Chapter 11 reorganization. That included Rockford Products, which eventually was broken up and its divisions sold separately.

In 2008, there were 26 business filings, including Commercial Mortgage & Finance Co. of Rockford, which filed Chapter 11 after the company was unable to redeem promissory notes because of real estate investment losses, and Modern Metal Products, an automotive supplier in Loves Park, which filed Chapter 11 in early December after its main lender pulled its line of credit.

Reach Assistant Business Editor Alex Gary at 815-987-1339 or agary@rrstar.com.